Brigitte LeBlanc-Lapointe, Norton Rose Fulbright Phil Shaer, Canopy Growth Corporation
April 22, 2021
Welcome and Introductions
• Corporate law • Securities law • Corporate governance • Contract law • M&A • Q&A
Agenda
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Corporate Law
Say-on-Pay • Will require prescribed issuers to have a annual advisory say-on-pay vote
Well-Being & Clawback Policies • Prescribed issuers will be required to make annual disclosure regarding:
(1) the “well-being” of employees, retirees and pensioners; and (2) the recovery of incentive benefits or other remuneration benefits paid to
directors and employees of the corporation who are “members of senior management”
⇒ “comply or explain” regime ⇒ will probably only apply to reporting issuers
Status • Bill C-97 received Royal Assent June 21, 2019 – awaiting Proclamation • Consultation period on proposed regulations ended March 31, 2021
CBCA – Say-on-Pay, Well-Being & Clawbacks
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• Since January 2020, public CBCA companies have had to make certain disclosures about the diversity of their boards of directors and “members of senior management”
• Centered around four designated groups: women, Indigenous peoples, persons with disabilities and members of visible minorities
• Targets and actual results to be presented in tabular form, and any additional targets or statistics should be presented separately
• Companies to disclose the date of the information
Status • In force since January 2020 • Guidance and report published April 2021
CBCA – Diversity
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Annual Elections & No Slate Voting • Directors will be required to be elected individually Majority Voting • will be required for uncontested director elections • a director can only be elected if the “for” votes represent a majority of the votes
cast • exception if need director in order have required min. number of directors or to
fulfil residency requirements ⇒ applies only to reporting issuers
Status • Bill C-25 received Royal Assent May 1, 2018 – awaiting Proclamation • Consultation period on proposed regulations will end April 27, 2021 • Anticipated to come into force July 1, 2021
CBCA – Election of Directors
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Shareholder Proposals • Shareholders will be required to submit notice of matters that they wish to raise
at the AGM 90 to 150 days before the anniversary of the previous AGM • Change from deadline of at least 90 days before the anniversary date of the
notice of meeting
Status • Bill C-25 received Royal Assent May 1, 2018 – awaiting Proclamation • Consultation period on proposed regulations will end April 27, 2021 • Anticipated to come into force July 1, 2021
CBCA – Shareholder Proposals
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Diversity disclosure (reporting issuers only)
Received Royal Assent May 1, 2018 and came into force January 1, 2020 Diversity disclosure guidelines published April 8, 2021
Bill C-25 Regs
Election and appointment of directors (reporting issuers only) Shareholder proposals (all corporations)
Received Royal Assent May 1, 2018 – awaiting Proclamation. Anticipated to come into force July 1, 2021. Proposed regulations published March 27, 2021. Comments due April 27, 2021
Bill C-25 Notice & access (reporting issuers only)
Received Royal Assent May 1, 2018 – awaiting Proclamation
Bill C-86 Register of individuals with significant control (private companies only)
Came into force June 13, 2019 Still awaiting clarifying regulations
Bill C-97 Fiduciary duties – enumerated factors to consider (all corporations)
Came into force June 21, 2019
Bill C-97 Proposed Regs
Say-on-Pay Disclosure related to well-being and clawback policy (probably reporting issuers only)
Received Royal Assent June 1, 2019 – awaiting Proclamation Consultation period on regulations closed March 31, 2021
Amendments • Will no longer have a residency requirement for directors (currently ¼ must be
Canadian) ⇒ applies to all corporations
• Ordinary resolutions of shareholders will be able to be passed by shareholders representing a majority of shares signing a written resolution
⇒ applies only to private companies
Status • Bill 213 received Royal Assent December 8, 2020 – awaiting Proclamation
OBCA – Director Residency & Shareholder Approvals
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Bill 190 Electronic signatures and electronic filings - temporary (all corporations)
Received Royal Assent May 12, 2020 and came into force May 12, 2020. The amendments will be repealed on the day subsection 40 (1) of Schedule 6 to the Cutting Unnecessary Red Tape Act, 2017 comes into force.
Bill 190 Virtual meetings and extension of deadline to hold AGM - temporary (all corporations)
Received Royal Assent May 12, 2020 and came into force with retroactive effect back to March 17, 2020. The amendments have effect only until the 120th day after the day the declared emergency is terminated, unless further extended. On October 1, 2020, a new regulation made under the OBCA (O. Reg. 542/20 – Extension to temporary suspension period) came into force extending the application of the temporary legislative amendments until May 31, 2021, subject to further extension.
Bill 213 Removes the residency requirement for directors (all corporations) Written ordinary resolutions can be passed by a majority instead of 100% of shareholders (private companies only)
Received Royal Assent December 8, 2020 – awaiting Proclamation
(all corporations)
Received Royal Assent May 12, 2020 and came into force May 12, 2020. The amendments will be repealed on the day subsection 40 (1) of Schedule 6 to the Cutting Unnecessary Red Tape Act, 2017 comes into force.
(all corporations)
Received Royal Assent May 12, 2020 and came into force with retroactive effect back to March 17, 2020. The amendments have effect only until the 120th day after the day the declared emergency is terminated, unless further extended.
On October 1, 2020, a new regulation made under the OBCA ( O. Reg. 542/20 – Extension to temporary suspension period ) came into force extending the application of the temporary legislative amendments until May 31, 2021, subject to further extension.
(all corporations)
Written ordinary resolutions can be passed by a majority instead of 100% of shareholders
(private companies only)
Securities Law
Amendments to OSC Rule 48-501 – Trading During Distributions, Formal Bids and Share Exchange Transactions • Rule currently restricts trading in securities by issuers, selling shareholders and
insiders during a prospectus distribution, restricted private placement, etc. • The amendments remove certain trading restrictions on insiders of issuer and
selling shareholders • Will take effect May 18, 2021
Securities Law
Replacement of Ontario Securities Act • Capital Markets Modernization Taskforce mandated to make recommendations to
modernize Ontario’s capital markets regulation • final report published January 22, 2021 • Ontario government announced in March that it will begin implementing some
recommendations, including replacement of Securities Act with new Capital Markets Act: – draft: within a few months – consultation: over the summer – implementation: by year-end
Securities Law
• New non-GAAP financial measures regulation (NI 52-112) ⇒ Anticipated to be published in May and come into force for 2022 proxy season
• Replacement of SEDAR & OSC Electronic Filing Portal ⇒ Anticipated to begin at the end of 2021
Securities Law
ESG
Glass Lewis • Vote withhold for the chair of the governance committee if the issuer has
inadequate disclosure concerning the board’s role in overseeing environmental & social issues
• New policy for 2022 • Applies to S&P/TSX 60 Index companies
Corporate Governance
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Diversity
CSA Staff Notice 58-312 ⇒ 6th annual report on disclosure regarding women on boards and in executive
officer positions
• Board Seats => 20% of seats held by women (2015 ~ 11%) • Executive Officer Positions => 65% of issuers had at least one woman (2015 ~
60%) • Targets => 26% have board targets & 4% have exec targets (2015 ~ 7% / 2%) • Term limits => 23% have director term limits (2015 ~ 19%) • Policy => 54% have a diversity policy (2015 ~ 15%)
Corporate Governance
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Diversity ISS • vote withhold if <30% women on board AND there is no formal written gender
diversity policy that includes a commitment to achieve ≥ 30% women • new policy for 2022 • applies to S&P/TSX Composite Index companies
Glass Lewis • vote withhold from chair of nominating committee if:
– zero women on board (where 6 or fewer total directors) – < 2 women on board (where 7 or more total directors)
• new policy for 2022 • applies to TSX-listed issuers
Corporate Governance
Contract Law
Duty of Good Faith & Honesty in Contractual Relationships • 2 recent SCC decisions regarding the duty • general organizing principle of common law introduced in 2014 by the SCC in
Bhasin v Hrynew
C.M. Callow Inc. v Zollinger Facts: • Condo group (“Baycrest”) entered into a 2-year winter maintenance contract and
a separate summer maintenance contract with Callow • Baycrest was entitled to terminate the winter contract on 10 days’ notice • In early 2013, Baycrest decided to terminate the winter contract but chose not to
inform Callow • Throughout the spring and summer, Callow had discussions with Baycrest
regarding a renewal, which Callow thought he would likely obtain, performing extra freebies
• Baycrest informed Callow of its decision to terminate the winter contract in Sept 2013
Contract Law
C.M. Callow Inc. v Zollinger (cont’d)
Held: • Knowingly misleading Callow into believing that the winter contract would not be
terminated = exercising the termination clause dishonestly = breach of duty
Key Takeaways: • More than an obligation not to lie => can include half-truths, omissions, and even
silence, depending on the circumstances • No obligation to disclose, but can’t let silence be misleading • Contractual rights must be exercised honestly => no contractual right, including a
termination right, can be exercised dishonestly and, as such, contrary to the requirements of good faith
Contract Law
Facts: • Waste removal company and municipal district had a long-standing contractual
relationship for the removal and transportation of waste to 3 disposal facilities, with differing rates depending on which disposal facility the waste was directed to
• Contract did not guarantee the company a certain profit in any given year • Contract gave the municipal district absolute discretion to allocate waste • Municipal district decided to reallocate waste in a way that reduced the
company’s profit
Held: • Reallocation of waste = exercise of discretion consistent with intent of contract =
no breach of the duty to exercise contractual discretion in good faith
Contract Law
Wastech v. Greater Vancouver (cont’d)
Key Takeaways • Exercise of discretion must be consistent with contractual intent • Breach of duty occurs where discretion is exercised unreasonably, in a manner
unconnected to the purposes underlying the discretion • ‘Fairness’ depends on what the parties bargained for. It is not what a court sees
as fair. Courts must only ensure parties have not exercised their discretion in ways unconnected to the purposes for which the parties themselves grant that power.
Contract Law
OSC Decision re: ESW Capital
• application for exemptive relief re: contested proposed take-over bid of Optiva by a control block shareholder, ESW Capital
• 1st time securities regulator has been asked to grant exemptive relief from the minimum tender requirement under the “new” take-over bid regime
• application was denied • OSC found that there were no exceptional circumstances or abusive or improper
conduct that undermined minority shareholder choice to warrant its intervention • “Predictability is an important aspect of take-over bid regulation and the OSC
must be cautious in granting exemptive relief that alters the recently recalibrated bid regime.”
M&A – Hostile Take-over Bids
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M&A – Hostile Take-over Bids
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SolGold plc failed
2020/07/27 Optiva Inc. ESW Capital, LLC failed (never formally launched)
2020/09/09 Calfrac Well Services Ltd. Wilks Brothers, LLC failed 2020/09/21 Bonterra Energy Corp. Obsidian Energy Ltd. failed 2020/11/04 Osum Oil Sands Corp. Waterous Energy Fund succeeded (following an
increased price) 2021/02/22 Inter Pipeline Ltd. Brookfield Infrastructure
Partners L.P. ongoing
Date Bid Launched
2021/02/22
Competition Act • 2021 pre-merger notification threshold relating to transaction size has decreased
from $96 million to $93 million Investment Canada Act • 2021 review threshold has been lowered from $1.075 billion to $1.043 billion in
enterprise value National Security Review of Investments • Government will subject all foreign investments by state-owned investors
(regardless of their value) or private investors assessed as being closely tied to or subject to direction from foreign governments to enhanced scrutiny
• Guidelines updated in March add new factors that the government may consider: – potential impact of an investment on critical minerals and critical mineral supply
chains – potential of an investment to enable access to sensitive personal data that
could be leveraged to harm Canadian national security
M&A – Competition & National Security
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Questions
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Canopy Growth Corporation
OBCA – Director Residency & Shareholder Approvals
Overview of Status of Amendments to the OBCA
Securities Law
Securities Law
Securities Law
Securities Law
Corporate Governance
Corporate Governance
Corporate Governance
Corporate Governance
Contract Law
Contract Law
Contract Law
Contract Law
Contract Law
M&A
Slide Number 29